© 2015 OnCourse Learning Chapter 1 Introduction to Real Estate Principles

IN THIS CHAPTER An introduction to real estate and the real estate profession. Definitions of real property, personal property, and related terms. Factors affecting real estate and the real estate profession.

Real estate, real property, or realty land and everything that is permanently attached to the land components of land – surface of the earth - surface – area above the surface - air space – area below the surface - mineral rights

Personal property everything that is not real property

Physical characteristics of real property 1. Immobility 2. Indestructibility (permanence) 3. Heterogeneity (uniqueness)

Economic characteristics of real property 1. Scarcity/limited availability 2. Permanence of investment 3. Location 4. Modification by improvement

GENERAL CONCEPTS OF LAND USE AND INVESTMENT Physical Factors Affecting Land Use o Location o Topography o Soil conditions o Size o Shape o Subjection to flooding o Action of the sun o The presence or absence of minerals

GENERAL CONCEPTS OF LAND USE AND INVESTMENT Artificial Factors Affecting Land Use o Streets o Highways o Adjacent land use patterns o Availability of public utilities

GENERAL CONCEPTS OF LAND USE AND INVESTMENT Economic Factors Affecting Land Use o Local property tax assessments o Tax rates o Wage and employment levels o Availability of financing o Interest rates o Growth in the community o Zoning o Fire regulations o Building codes o Extent of community planning

Highest and Best Use  The use of land that will preserve the land utility, provide the greatest income, and result in the greatest present value of the land.

Land Use Restrictions Feudal system - land was owned or controlled by the king Allodial system - individual, private ownership of land City planning and zoning Building codes Private restrictions on land use

Investment The outlay of money expecting income or profit Or the acquisition of property expecting income or profit

THE REAL ESTATE PROFESSION Real estate brokerage National Association of REALTORS® (NAR), organized in 1908 REALTOR® is a professional in real estate who subscribes to a strict code of ethics Association of Real Estate License Law Officials (ARELLO), established in 1929

THE REAL ESTATE PROFESSION Real estate licensee - a person licensed to sell real estate May specialize in one or more fields, such as: – farmland – multifamily dwellings – commercial – retail – residential – industrial sales

The Fundamentals of a Real Estate Transaction Listing Contract - a property owner employs a real estate firm to market a property for a prescribed period of time at a prescribed price and terms Contract for Sale - a binding contract to buy and sell real property results from the written acceptance of a written offer to purchase with proper notification.

The Fundamentals of a Real Estate Transaction Financing - the concept of borrowing is called leverage. Leverage - the use of someone else’s money to enhance your own. Final Settlement - completion of the real estate transaction.

THE REAL ESTATE MARKET A free market provides buyer and seller time without undue pressure or urgency. Properties are given substantial exposure. Properties are available for inspection.

THE REAL ESTATE MARKET The physical characteristics of land create special conditions. The real estate industry traditionally has been subject to cyclical periods. The goal of a real estate salesperson is to read the market and act accordingly.

 allodial system  Association of Real Estate License Law Officials (ARELLO)  feudal system  free market  heterogeneity  highest and best use  homogeneity  immobility  indestructibility  investment  land use controls  leverage  listing contract  location  National Association of REALTORS® (NAR)  personal property  real estate  real property  REALTOR®  realty  scarcity  supply and demand CHAPTER TERMINOLOGY REVIEW